Bank of America’s global head of technical strategy, Paul Ciana, issued a warning that the S&P 500 Index could experience a “three-wave correction” dropping as low as 6,850 between July and September.
According to the Bloomberg and Yahoo Finance reports, this call relies on a few key technical signs:
- Market Exhaustion: Diverging momentum and a “Red 13” TD Sequential signal suggest that the S&P’s rally is losing steam.
- The “ABC” Pattern: The bank’s technical team identified an “abc correction” (a decline coming in three distinct waves), noting the index could see a “sideways-to-lower” pattern as it navigates Elliott Wave patterns.
- Potential “Bull Trap”: BofA advises caution on any marginal rallies, stating that a new high toward 7,741 points could serve as a bull trap.
- Rebound: Despite the summer turbulence, BofA remains positive on the long-term outlook, expecting the market to recover and a rebound to take shape by the fourth quarter.
